Neobanking is set to boom in South Africa, with nearly a quarter (24%) of surveyed South African adults expected to bank with a digital-only bank by 2023.
This is according to financial data analytics firm Finder’s Neobanking Adoption Report, which is based on a survey of thousands of digital citizens across 14 markets, including SA. Around 2 179 of respondents consisted of South African internet users.
The report reveals that around 15% of surveyed local adults currently have a neobank account, with an additional 9% planning to open one by 2023, bringing the percentage of local respondents with a digital bank account to 24%.That figure is projected to jump even higher, to an estimated 31% of South Africans by the end of 2027.
A neobank − also known as an internet-only bank, virtual bank or digital-only bank − is a type of bank that operates exclusively online without traditional physical branch networks.
Over the past three years, SA’s retail banking industry has been revolutionised by the rise of digital-only banks, with the launch of TymeBank, Discovery Bank and Bank Zero. The key differentiator of these new branchless banks is that they ensure competitive rivalry in the local banking sector, through agile offerings and lower costs.
This has seen traditional banks accelerate their digital-first strategies and aggressively reposition their platform-based model, to offer customers innovative financial products and services.
Finder’s global fintech editor, Elizabeth Barry, says neobanks are increasingly becoming popular with consumers across the globe.
“Neobanks allow consumers to set up an account from the comfort of their own homes. They’re usually quick to set up, low fee and focus heavily on providing a great customer experience. Of the countries included in the study, Brazil (43%) and India (26%) have the highest percentage of adults with neobank accounts, followed by Ireland (22%) and Singapore (21%).”
However, neobanks do still require an internet connection and proof of identity – so they’re not necessarily a silver bullet for the unbanked, she adds.
The COVID-19 pandemic saw a sharp decline in customers visiting bank branches and an increase in digital interactions, amid fears of spreading the virus.
According to Finder, neobanks are particularly popular with South African men – with nearly 18% of surveyed men saying they have a neobank account, compared to 12% of women. Those aged 35 to 44 years in SA are most likely to have a digital bank account, with 178% of respondents having an active service.
In SA, TymeBank has amassed five million customers in its three years of existence, with over 100 000 small businesses.
Discovery Bank says it has seen strong growth since its public launch in 2020, garnering over one million bank accounts, held by over 450 000 clients.
Bank Zero in October told ITWeb it had seen a rapid uptake in customer sign-ups, although its numbers were not disclosed.
In terms of countries with the most digital bankers, the report notes Brazil leads the way for digital bankers in 2022, with 43% of those surveyed saying they have an account.
Brazil is followed by India (26%), Ireland (22%), Singapore (21%), Hong Kong (20%), United Arab Emirates (19%), Mexico (17%), Spain (17%) and South Africa (15%).
At the other end of the spectrum, the US had the smallest percentage of adults with a digital-only bank account (8%), followed by both the Philippines and Malaysia at 13%, and Portugal and Germany with 14%, according to the report.
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